HPE
Hewlett Packard Enterprise Co
TMT
06/20/2023
Presented
| Date | 06/16/2023 |
| Price | $17.57 |
| Market Cap | $22.69B |
| Ent Value | $29.35B |
| P/E Ratio | 22.74x |
| Book Value | $15.76 |
| Div Yield | 2.73% |
| Shares O/S | 1,291.52M |
| Ave Daily Vol | 13,319,337 |
| Short Int | N/A |
Current
| Price | $20.74 |
| Market Cap | $26.93B |
| Hewlett Packard Enterprise Co. is a global edge-to-cloud company, which engages in the provision of information technology, technology and enterprise products, solutions, and services. It operates through the following segments: Compute, High Performance Computing & Artificial Intelligence (HPC & AI), Storage, Intelligent Edge, Financial Services, and Corporate Investments and Other. The Compute segment includes both general purpose servers for multi-workload computing and workload optimized servers to offer the best performance and value for demanding applications. The HPC & AI segment offers standard and custom hardware and software solutions designed to support specific use cases. The Storage segment provides workload optimized storage product and service offerings, which include an intelligent hyperconverged infrastructure with HPE Nimble Storage dHCI and HPE SimpliVity. The Intelligent Edge segment offers wired and wireless local area network, campus and data center switching, software-defined wide-area-network, network security, and associated services to enable secure connectivity for businesses of any size. The Financial Services segment provides flexible investment solutions, such as leasing, financing, IT consumption, utility programs, and asset management services for customers that facilitate technology deployment models and the acquisition of complete IT solutions, including hardware, software, and services from Hewlett Packard Enterprise and others. The Corporate Investments and Other segment includes the A & PS business that primarily offers consultative-led services, HPE and partner technology expertise and advice, implementation services as well as complex solution engagement capabilities, the Communications and Media Solutions business, the HPE Software business, and Hewlett Packard Labs. The company was founded on July 2, 1939 and is headquartered in Spring, TX. |
Publicly traded companies mentioned herein: Alphabet Inc (GOOGL), Arista Networks Inc (ANET), Cisco Systems Inc (CSCO), Dell Technologies Inc (DELL), Extreme Networks Inc (EXTR), Hewlett Packard Enterprise Co (HPE), HP Inc (HPQ), Unisplendour Corp Ltd (000938 CH)
Highlights
The presenter is long shares of Hewlett Packard Enterprise Co (HPE), believing that most investors value the company incorrectly. Almost half the business is Compute, which mainly sells x86 servers that enterprises deploy on-premise. The remainder is comprised of Storage, Intelligent Edge (the networking business that offers wired and wireless LAN, campus and data center switching, and SD-WAN), High Performance Computing & AI (HPC & AI), and Financial Services (HPEFS). He views this as a simple SOTP story. The current $17.75 stock price equates to a $34B EV, but subtracting the HPEFS assets ($13B), upcoming net proceeds from a Chinese JV put option ($3B), expected FCF over the next eighteen months ($5B), and the value of its crown jewel Intelligent Edge ($12B) implies almost zero value for Compute and Storage. Those two segments combine to drive the majority of revenue and profitability but are viewed as secular decliners. While he doesn’t see major upside to Compute and Storage, they combined for $2.4B of operating income in 2022 and should continue to generate ~$2B of operating income going forward. DELL’s ISG segment is an appropriate comp for those segments and trades at an implied ~5.5x EBIT, so the investor sees a major disconnect. He attributes the disconnect to investors simply looking at consolidated EPS (HPE trades ~8.5x, DELL ~9x). Ultimately, his analysis implies upside to the low-$30 range.
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